Homes are selling faster than ever, and the low inventory is causing buyers to compete for a limited number of homes available. This increased demand and quick-moving market can often result in multiple offers coming in on a property. While the idea of a bidding war may sound desirable to some sellers, there are a few crucial principles to know to help your clients stay focused and avoid legal trouble.
- Watch for potential fair housing red flags. Heartfelt letters to sellers, sometimes called “buyer love letters,” can open doors to potential fair housing violations. These letters can often include personal information that leads to a prohibited basis for prejudice. Many times, in trying to convince the seller to accept their offer, the buyer will reveal characteristics about themselves such as race, religion, or familial status. To avoid a fair housing violation, a seller should not accept or reject offers based on the characteristics of a buyer but rather the decision to reject or accept an offer should be based on objective criteria. It is a best practice to make sure to document all offers received by the seller along with the objective reasoning for acceptance or rejection of the offer.
- Explain options and alternatives to your clients. The REALTOR® Code of Ethics requires REALTORS® to “protect and promote the interest of their client” in multiple offer situations and also denotes that, “REALTORS® shall submit offers and counter-offers objectively and as quickly as possible.” Prepare your clients that these offers will likely come in fast and advise them on their available options. For example, sellers can accept what they deem to be the “best” offer and reject all others, or they can also invite all potential purchasers to make their “best” and final offer. Sellers may also choose to counter a selected offer while holding other offers to the side as they await a decision on their counteroffer. Keep in mind that every approach has its advantages and disadvantages.
- Know that there are no guarantees. Inviting buyers to make their “best” offers may produce an offer (or offers) better than those “on the table.” But this tactic may also discourage buyers who feel they have already made a fair offer resulting in them breaking off negotiations to pursue other properties. Make sure you are communicating regularly with your clients so they have the expert guidance they need to navigate this process.
While it can be exciting for a seller to have so much interest in their property, it is important they know their options and are aware of potential fair housing violations.